BONUS ISSUE

This query is : Resolved

Bhavya (Querist)
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06 October 2010 Actually i want 2 know what are the conditions for issuing bonus shares ???
1st is that company should convert partly paid up shares to fully paid up shares
In this case company will call up full amt on shares but what if sum shares are still unpaid i mean there are calls in arrears so now bonus shares will be issued to whom ??
and in what proportion???
Will bonus shares be issued to them also whose shares are partly paid ??

Ajay Mishra

Ajay Mishra (Expert)
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06 October 2010

No, Bonus shares can not issued to partly paid shareholders.

Regards

Ankur Garg

Ankur Garg (Expert)
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06 October 2010 Hi,

The Companies Act, 1956 does not contain any provisions dealing with bonus shares. Section 205(3) of the Companies Act, 1956 there is no prohibition on a company to capitalise its profits or reserves for the purpose of issuing fully paid-up bonus shares or paying up any amount, for the time being unpaid, on any shares held by the members of the company.

You need to check whether your Articles of Association contains any restriction on capitalization of profits or reserves for issuing fully paid up bonus shares.

Regulations 96 & 97 of Table A to Schedule I of the Companies Act, 1956 contain provisions relating to capitalisation of profits and reserves of the company. As per these regulations the proposal to issue bonus shares has to be approved by the shareholders of the company in general meeting upon recommendation by the Board of Directors of the company However if these regulations have been excluded from the Articles of Association of the company then it shall be sufficient if the Board approves the bonus issue.

To conclude if your AOA required obtaining shareholders approval then you need to pass Ordinary Resolution and file form 23 along with form 2 for allotment otherwise it shall be sufficient to pass Board resolution for allotment of bonus shares.

Best Regards

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